Insurer's Duty to Defend

Under an insurance policy, an insurance company has two principal obligations. One of those obligations is the insurance company's duty to defend the insured in the event of a claim within the policy's coverage. The insurance company's duty to defend is triggered when the insured gives the insurance company notice of the claim or lawsuit against the insured. The duty to defend an insured is controlled by statute and common law.

The duty to defend requires an insurance company to pay for the defense of the insured in a lawsuit for damages covered under the insurance policy. The insurance company may also have a duty to defend in an administrative proceeding if the insured is subject to an award of damages for the claimant. If the insured wants the insurance company to defend, the insured should notify the company of the suit as soon as possible. Some courts have found the insurance company is not liable for the expenses of the suit incurred before it was notified of the suit and asked to defend it.

The insurance company's duty to defend could arise if there is the potential that the damages sought in the lawsuit against the insured are covered under the policy. Some courts would require the company to defend only if it is clear from the complaint that the damages sought are covered. Other courts would require the insurance company to review the complaint and the policy to determine whether the damages are covered. Finally, a few courts would require the insurance company to look at any relevant information that would reveal whether covered damages were at issue in the lawsuit.

If an insurance policy gives an insurance company a right to defend, it means that the insurance company has the right to control the defense. The insured is still entitled to have his or her interests properly represented by defense counsel. Defense counsel would be liable to the insured for malpractice in the course of the representation. However, it is the insurance company that hires and pays the counsel and authorizes any settlement of the lawsuit.